How Small Businesses Find Profit In Loyal Customers

Nurturing existing customers may seem like a lost art, especially for small-business owners. Still, data from a study released Wednesday reveals many have begun to change their ways.

The joint study from BIA/Kelsey and Manta found that small-business owners finally grasp the impact existing or lifelong customers have on their business. More small business owners now invest time, money and resources in strengthening relationships with existing customers. In fact, they spend more than half of their time and budget, per the study "Achieving Big Customer Loyalty in a Small Business World," which surveyed nearly 1,000 small business owners.

Some 61% report that more than half of their annual revenue comes from repeat customers, rather than new customers, and that a repeat customer spends 67% more than a new customer.

Only 14% spend the majority of their annual marketing budget to acquire new customers, and 20% invest most of their time and effort to acquire new customers.

Despite some shift in behavior by small-business owners, not many take advantage of their customer relationships. Few small businesses have a loyalty program, only 34%, and those who do offer what the study calls "an unsophisticated experience" that owners largely manage offline. Owners don't take advantage of technology that would give them deeper insight into their customer base. Many understand the value of building a long-lasting relationship with customers, but most lack a clear strategy to connect and drive repeat sales.

When asked about the purpose of their customer loyalty program, about 30% of those with one said they want to "improve customer relationships" and 36% said they use it to "grow revenue." But without tools such as CRM systems or automated programs to achieve deeper insights into their customer base, retaining customers and growing lifetime value remains challenging.

The study also makes recommendations to build better relationships with customers. It suggests building a loyalty program based on the desired outcome. Create an opt-in option. Go mobile, don't forget about social, and automate processes. Keep consumer engaged with the site and its content.

Finally, structure the company's loyalty program to generate a positive return on investment. Make a list of multiple options that will help to achieve certain goals and determine how much it will cost and the amount the company will net in returns.

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1 comment about "How Small Businesses Find Profit In Loyal Customers".
  1. James Pereira from Reputation Marketing Coach , April 5, 2014 at 12:45 a.m.
    Laurie, great that you've highlighted this. This just proves that any business should focus on 20% of it's customers to grow the 80% of it's revenue. This is what large companies do all the time. It's easier in a B2B environment because you know what customer spends with you. In a B2C scenario, the business needs to have a loyalty programme in order to determine who buys what, when. Love your point about these businesses focusing less on ads that are for the masses. As John Wannamaker said, we never know which 50% of our ads are worthless. There are free methods of getting customers to return and for them to bring in new customers. Free is good.